Date posted: 02/10/2023 5 min read

Raising capital through market ups and downs

No matter the economic environment, businesses need access to sufficient funds, whether via debt or equity, to help them grow and thrive. Brought to you by the Australian Business Growth Fund.

“Uncertainty is the only certainty there is,” said mathematician John Allen Paulos in A Mathematician Plays the Stock Market. For Australian businesses, uncertainty is a constant as they continue to ride the highs and lows of market fluctuations.

But no matter the economic landscape, businesses need a long-term strategy, and capital – be it debt or equity – is an important ingredient for them to flourish.

So, what steps can businesses take to access capital?

Be proactive, no matter the market conditions

Strong businesses proactively look at their capital structures to sustain themselves through smooth and rocky times. Many businesses seek out capital well before they need it. Businesses that are performing well will often receive a better valuation, giving them greater security for the future should the path forward become less stable.

High interest rates, stimulus-driven inflation, skills shortages and drops in consumer spending all put pressure on businesses and it’s often hard to predict when these may occur. Those businesses that fare better are typically well established, have a unique value proposition, a resilient capital structure and access to further capital.

Good relationships go a long way

Debt funding is important for businesses looking to build, grow or maintain their operations. When interest rates are high, financial institutions are naturally more conservative with lending. Parameters for businesses looking for a new loan or refinancing can be more stringent and debt funding, no matter its purpose, can have higher hurdles to pass.

However, businesses with quality relationships and a solid track record with their financial institutions are better positioned to receive support through tough conditions. And if tough conditions do strike, being proactive and transparent goes a long way. Banks can often work with businesses to develop a strategy that supports them, even when they are facing temporary setbacks.

Even so, banks can only loan to a certain risk level and some businesses may prefer not to take on debt. Equity can be an alternative solution for businesses looking for capital.

Embrace growth opportunities in different economic environments

Different market conditions offer different opportunities. Uncertain economic environments can open new doors for strong businesses to win new work or acquire a competitor and increase market share, while stronger markets more easily enable businesses to grow their customer base organically. No matter the conditions, a flexible capital structure ensures businesses can adapt quickly and take advantage of growth opportunities.

Businesses seek growth capital, a type of equity funding, for many purposes. This can include product development, acquisition, working capital or expanding capacity and capability. Long-term equity partners often bring more than just capital to a business – they bring strategic capability and connect businesses to broader networks to help them grow. With investors having skin in the game, businesses with a long-term equity partner are often well placed to not only ride out challenges in the market, but to take advantage of these, too.

Supporting businesses through ‘certain uncertainty’

Through market ups and downs, some businesses will find it easier than others to secure capital and accelerate their long-term growth. Regardless, businesses with a balanced capital structure, be it debt or equity or both, and long-term relationships with their capital partners, are better positioned to grow and thrive through the ‘certain uncertainty’ of the market.

Need help finding an investor?

The Australian Business Growth Fund (ABGF) is dedicated to investing in Australian entrepreneurs, disrupters and growth-oriented businesses. Find out more about how we can help your business find a long-term equity partner, or sign up to receive our regular growth insights.